Answers

Applied Skills, LW – LSO

Corporate and Business Law – Lesotho (LW – LSO) June 2020 Answers

Section A

1 An agency agreement may always be terminated by the principal

Some agency agreements cannot be revoked, e.g. lasting power of attorney.

2 Yes, because she was unfairly dismissed

If a person without a justifiable reason is dismissed, such a person may file a case of unfair dismissal. Justifiable reasons do exist,
however, based on the facts of the scenario, Momo was just unfairly discriminated against.

3 Insolvency of the employee

Section 66 Labour Code 1992 lays down grounds upon which an employee may fairly be terminated, these are: capacity of the
employee, operational requirements of the undertaking and conduct of the employee. Insolvency is therefore not a legitimate ground
for the termination of a contract of employment.

4 Damages only
Minor breach of an innominate term of the contract gives rise to an award of damages but not to termination or specific performance.

5 Laws created by parliament

Parliament creates law in the form of statutes and such laws stand in contrast to judge made law. The latter is referred to as common
law, as is the type of legal system in which the judiciary have such a role.

6 Everyone is equally subject to the law

Being equally subject to the law is a key feature of the rule of law rather than of the separation of powers.

7 The company as an entity is regarded as a legal person

A company is an artificial person created by law, having perpetual succession and a separate identity from its members.

8 4, 2, 1 and 3
An official ‘hierarchy’ is laid down by the Insolvency Proclamation 1957, it determines which group of creditors is paid first during
an insolvent liquidation. The correct hierarchy is as follows: liquidation expenses, employees, secured creditors and shareholders.

9 To take a commission
Agents have a number of duties but they do not have a duty to take a commission.

10 It abolishes marital power

Marital power was a doctrine in terms of which a wife was legally an incapax under the usufructory tutorship of her husband. The
Legal Capacity of Married Persons Act 2006 abolished the doctrine of marital power in Lesotho.

11 It is an invitation to treat
Generally, advertisements are invitations to treat and not offers. It is the party who responds to the advertisement who can provide
the offer, which may then be accepted or rejected.

12 1 and 2
Employment law is concerned with employees engaged by employers on the basis of a contract of service, whereas independent
contractors are engaged by means of a contract for services.

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13 It must be held whenever it is proposed to declare dividends out of profits
In terms of s.49 Companies Act 2011, companies are mandated to hold annual general meetings at least once a year which should
not be later than six months after the end of a financial year or later than 15 months after the previous annual general meeting.
Availability or otherwise of dividends is not a determining issue.

14 The Financial Intelligence Unit

The Prevention of Corruption and Economic Offences Act 1999 establishes the Financial Intelligence Unit and gives it a mandate to
issue guidelines to accountable institutions on how to combat money laundering and terrorism financing.

15 Only partnerships registered under the Partnership Proclamation are legally recognised
Under s.2 Partnership Proclamation 1957, for a partnership to be legally recognised, the partnership agreement must be reduced
into a partnership deed and duly registered in terms of the Partnership Proclamation.

16 Criminal law
Criminal law is an example of public law. Contract law, the law of delict and company law are all examples of private law.

17 The mischief rule

There are three main rules to interpret a statute: the literal rule, the golden rule and the mischief rule. The mischief rule is an example
of the purposive approach to statutory interpretation.

18 They are not binding but may be regarded as persuasive judicial authority
Obiter dicta are statements made ‘by the way’ or ‘in passing’ in addition to the binding ratio decidendi. Obiter dicta are not binding
on any court; however, where the statement was made by a superior court, it can be particularly influential, and may be regarded
as persuasive judicial authority, although still not formally binding.

19 In Roma
When the acceptance is communicated by fax machine, it is instantly received, thus it is at that point that a legally binding contract
will be recognised. This differs from the postal rule where an acceptance is complete upon postage.

20 The duty of care in providing equipment is satisfied by purchasing the equipment from a reputable supplier
Duties relating to the provision of machinery and equipment exist. It is not necessary for the employer to prove that they obtained
equipment from a reliable supplier.

21 They never have perpetual succession

Partnerships registered in terms of the laws of Lesotho dissolve upon death, resignation or incapacity of one or more of the partners.
Therefore, such partnerships cannot have perpetual succession.

22 To investigate unusual transactions

Accountable institutions do not have the duty to investigate unusual transactions in the context of money laundering.

23 Reserve capital
Capital which is called up in the event of a company being liquidated is reserve capital.

24 15 years
Under s.124 Labour Code 1992, it is unlawful for anyone to employ a child. In terms of the Code, a child is anyone below the age
of 15.

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25 Only the parties to the contract can enforce it
A contract is a private agreement and only the parties to the agreement can sue on it. Other parties may have an interest in the
contractual obligations being performed but they do not have the right to bring an action on the contract.

26 The contract is destitute of legal effect

If a contract is void, it is unenforceable by either contracting party. No rights at law can attach to the parties at law in relation to the
contract, so repudiation will not be necessary.

27 The legal reason for reaching a decision

The ratio decidendi is the legal reason for reaching a decision.

28 Words should be given their ordinary grammatical meaning unless the meaning is manifestly absurd
It is the literal rule which requires the ordinary meaning of words to be applied where only one meaning is possible. If a word has
more than one meaning, then the court can apply the meaning which avoids an absurd result, thus applying the golden rule.

29 They can be expressly excluded by the parties in their agreement

Naturalia terms can be expressly excluded by the parties in their agreement.

30 After eight years

Section 7 Prescription Act 1861 provides that liquid claims shall prescribe after an uninterrupted period of eight years.

31 Yes, because a gratuitous agent who chooses to act should do so in accordance with the principal’s instructions
An unpaid (gratuitous) agent will have no duty to act as no consideration has been provided by the principal but if they do act, they
must do so in accordance with the instructions set out by the principal.

32 75% of members present and entitled to vote in person or by proxy

Under the terms of the Companies Act 2011, a special resolution means a resolution which is approved by at least 75% of the
members entitled to vote in person or by proxy who are present and voting on the resolution.

33 1 only
Essential aspects of an employment contract are that the employee must agree to work for the employer in return for agreed wages
or salary.

34 The placement of the company under judicial management

An order for judicial management should be used in the case of company deadlock in preference to the liquidation of the company.

35 The parties’ non-expressed intentions as to the classification of the statement

The relative degrees of the parties’ knowledge, the reliance shown to be placed on the statement and the timing of the statement are
all used by the courts to distinguish a term from a representation. The intention of the parties may be relevant but this is difficult for
the court to test without some outward sign, and is therefore not used by the courts to identify a term from a representation.

36 The damages awarded shall be reduced to such extent as the court may deem just and equitable having regard to the degree in
which the claimant was at fault
Before making an award as to damages, the court will consider the extent to which the claimant was at fault. This consideration has
the effect of discounting the total damages awarded against the defendant.

37 It is an order that the parties be placed in their exact pre-contractual position

Rescission is an equitable remedy under which parties will be restored to the positions they enjoyed before the contract was entered
into.

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38 Malicious intent on the part of the defendant
Duty of care, breach of duty of care and causation of damage of a legally recognised type must always be established by the claimant
in order to be successful in a negligence action. Malicious intent on the part of the defendant is not a required element in establishing
a negligence action.

39 To put the innocent party in the same financial position they would have been in had the contract been carried out
The purpose of damages is not to penalise or punish a party for failing to carry out the contract but to put the innocent party in the
same financial position they would have been in had the contract been completed.

40 From the date on which the other party indicates their intention not to complete the contract
An anticipatory breach of a contract arises where one party, prior to the actual date of performance, expressly informs the other
party that they do not intend to perform their contractual obligations, or where it is clear from their conduct that they do not intend
to perform all their obligations.

41 No, because there ought to have been approval of the alteration by a resolution of the ordinary shareholders
Class rights cannot be varied unless the consent of the affected class of shareholders is obtained.

42 One week
Under s.63 Labour Code 1992, one week’s notice is required for an employee who has served for a period of less than six months.

43 It is retrospectively created by confirmation of the principal

Agency by ratification arises when a person (the principal) ratifies or approves and adopts an act which has already been done in
their name and on their behalf by another person (the agent) who, in fact, had no actual authority (whether express or implied) to
act on their behalf when the act was committed.

44 The board of directors

Under s.35 Companies Act 2011, dividends are declared by the board of directors only if the company satisfies the solvency test.

45 The company’s board of directors

The board of directors may propose the voluntary dissolution of the company.

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Section B

46 (a) A director has apparent authority to act on behalf of the company. Express authority is not needed. Where a person is acting
as the managing director without having been appointed to that position, their actions will be binding on the company. Where
the other directors are aware of the conduct and through omission allow it to continue, then the company will remain bound
by the actions of the individual.

(b) Yes, Hloni may be removed as a director. To remove him, the procedure laid down in s.73 Companies Act 2011 should be
followed. A special general meeting should be called with a clear agenda item of removing a director who should be named.
An ordinary resolution should then be passed at the meeting removing the named director.

47 (a) There was no contract between Adolph and Tom because there was no agreement reached between them. The response to the
offer introduces something new. It was not a blanket acceptance of the offer; it amounted to a counter-offer. The counter-offer
to pay M25,000 after two months was made by Tom but this was not accepted by Adolph.

(b) The counter-offer has no effect on Adolph’s original offer. It was a fresh offer which could be accepted or rejected by Adolph. A
counter-offer cancels the original offer and stands to be accepted or declined by Adolph. For this reason, Adolph was at liberty
to contract with a different person, thus his contract with Moses to sell the car for M26,000 is valid.

(c) An offer may be terminated by the following:

– Revocation of an offer by the offeror;
– Counter-offer by the offeree;
– Rejection of an offer by the offeree;
– Lapse of time;
– Death or incapacity of either party; and
– If performance of the contract becomes illegal after the offer was made.

48 (a) The individual partners and the partnership are one and the same. This is because a partnership does not have a separate
legal identity. Thus, the partners and the partnership are liable for partnership debts. Execution will normally be effected against
partnership assets first and then, if the debt is still not satisfied, execution will be against the personal assets of the individual
partners.

(b) The partners are jointly and severally liable for the partnership debts. This means that one partner may be singled out and sued
for the partnership debts. Therefore, Thoso could be sued by Lilala Wholesalers for the M50,000 owing to it.

(c) Partners in a partnership are each other’s agents. This means that they have authority to bind fellow partners as long as they
can be reasonably presumed to be working within the scope and mandate of the partnership. Therefore, Lilala Wholesalers may
claim Teboho’s debt from the partnership; however, the other partners will have a claim against Teboho for settling his debt.

49 (a) In terms of the Penal Code 2010, insider trading is an offence committed by a person who uses confidential information which
they have obtained in their position as an employee, agent, or professional adviser of another in order to secure for themselves
or another some improper commercial advantage in any transaction.

(b) Thabo committed the offence of ‘insider trading’ under the 2010 Penal Code because he used confidential information which
accrued to him as an insider to create a commercial benefit for himself.

(c) Tšeliso never actually traded on the basis of non-public information which he obtained from Neo, therefore, Neo is not guilty
of the offence of insider trading.

50 (a) A shareholder is a person who has an interest in a company, which is reflected by a sum of money invested in that company.
A shareholder has a share in the company’s share capital. They are said to be the owners of the company. If a company
only has one class of shares, they will be ordinary shares. Preference shares are those shares which grant holders thereof
preferential rights. For example, they will receive dividends before ordinary shareholders. They also have preferential rights to
the repayment of capital when a company is wound up.

(b) A company is not obliged to declare a dividend every year and to make payment to shareholders. It only makes payments to
shareholders where there are profits which are available for that purpose. Therefore it was not unlawful for Spark Ltd not to
declare a dividend and not to make payments to shareholders between the years 2017–2019. This applies to both ordinary as
well as preference shareholders. The preferential treatment granted to preference shareholders does not mean they are entitled
to payments when a dividend has not been paid. However, as preference shares are cumulative, this means that Emily will
receive her payments for 2017–2019 in a subsequent year when Spark Ltd declares a dividend.

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Applied Skills, LW – LSO
Corporate and Business Law – Lesotho (LW – LSO) June 2020 Marking Scheme

Section A

1–45 One or two marks for the correct answer up to the total of 70 marks.

Section B

One mark for each correct point to the up to the total of 30 marks.

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Additional marking guide for section B Marks available Marks awarded

46 (a) Authority of a director and application. 3

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(b) Procedure for removing a director and application. 3

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Total marks 6
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47 (a) Effect of counter-offer on position with Tom. 2

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(b) Effects of counter-offer on position with Moses. 2

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(c) Ways in which an offer may be terminated. 2

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Total marks 6
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48 (a) Legal nature of partnership and effect on liability. 2

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(b) Joint and several liability of partners and application. 2

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(c) Mutual agency of partners and application. 2

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Total marks 6
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49 (a) Definition of insider trading. 2

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(b) Application to Thabo. 2

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(c) Application to Neo. 2

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Total marks 6
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50 (a) Difference between ordinary shareholders and preference shareholders. 2

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(b) Legality of the decision not to declare a dividend. 4

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Total marks 6
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